It was an eventful second quarter for the Godrej Group which also saw its Indian joint venture partner, Sara Lee Corporation, sell a part of its US business to Unilever Plc. Though Godrej Industries reported a fall in sales, profits have more than doubled. Mr Adi Godrej, Chairman, Godrej Group, spoke to Business Line on various developments and the road ahead.

Excerpt from the interview:

Why have Godrej Industries’ sales fallen in the second quarter?

The sales fell mainly due to two reasons. Godrej Sara Lee, which was earlier consolidated under Godrej Industries, is now consolidated with Godrej Consumer while Godrej Hicare, the pest control business consolidated with Godrej Industries, has been sold.

The sales turnover at Godrej Industries, which consists mainly of the oleo-chemicals business, has been much better than last year. All the subsidiaries under Godrej Industries including Godrej Agrovet, Godrej Properties, agri-inputs and the animal feed business have done well, which has helped double profit during the quarter.

Did lower raw material costs also help?

The contribution of the fall in raw material cost to our profitability was fairly good while lower overheads also helped. On the whole, business is back to normal.

If you remember, during the same quarter last year, the first sign of stress on the global economy had started impacting demand.

On product pricing, we had to reduce prices in most of our businesses such as animal feed, chemicals and vegetable oil as raw material costs came down substantially.

How do you see raw material prices panning out in the coming months?

It is very difficult to predict raw material prices as much will depend on crude oil. Though there is an uptrend in crude, it will definitely not go back to the levels of USD140 a barrel seen last year. It also depends on how the global economy performs.

What impact would the sale of Sara Lee’s personal care business to Unilever have on your own tie-up with the company here?

There will be no impact here as our joint venture with Sara Lee pertains to the household care business.

We are aware that the company wants to sell this business too and will look into it as and when it comes to us. We will also look at alternatives. I cannot say more as the matter is confidential.

What are your plans to develop the Vikhroli property?

Godrej Industries and Godrej Properties have floated a special purpose vehicle to develop the Vikhroli property. Godrej Industries owns about 3,500 acres in Vikhroli (a Mumbai suburb). In the first phase, the SPV will develop about 35 acres. Over a period, our intention is to have a complete township including hotels and other facilities amidst lush greenery.

How will you fund the development project and when is the Godrej Properties IPO due?

If market sentiment is favourable, we should be able to complete the IPO in the next two months. We recently re-filed the prospectus with SEBI. We will issue 13.5 per cent equity and the entire proceeds from the IPO will be invested in real estate projects.

What do you have to say about the recent RBI policy?

I see it as more sensible. The Statutory Liquidity Ratio has been changed by one percentage point which is neither here nor there. At present, there is enough liquidity in the system. The RBI stand of not hiking rates (repo and reverse repo) is good. Interest rates should not be raised before the economy is fully back on track. I do not think the bank will hike rates unless inflation goes up.

Taken from Business Line